As mentioned before in almost every luxury industry, high net worth individuals love and crave to work with experts in the industries ranging from cars, watches, and of course luxury real estate. It’s almost a given that buyer and sellers of luxury goods will want some form of written research an or comparison on direct competitors to a specific item and in this case home. Although we can never know what the market will do in the future, one thing we can do and have full control of is in the way we monitor and interpret what’s happening in the market place, to understand what’s selling and what’s not; but most importantly, at what price it is moving in the market place. This is where the essential skill of constructing a competitive market analysis comes into play and I’ll share the way I handle the construction of a CMA, and what I look for in doing so.
First things first, when I started in luxury real estate I lacked credibility because of my age and the market was super saturated with many grey haired more experienced agents, and that’s who ultimately ended up being my competitor. I came to the conclusion that to make it, I had to know everything that’s going on in my market and truly know like the back of my hand all the facts. To make myself more appealing I would construct a full CMA report that would break down my recommended price to sellers based on the direct competitors of their home on the market and what’s actually selling.
When constructing a CMA Here’s are the things I look for and consider important, not because I was some genius and figured it out on my own; but because I’ve read a lot, studied a lot, and most importantly asked millionaire agents a lot of questions!
1. Date of Sale – This is important if your creating a CMA for a client you’ll need to look up and find every direct comparable to the subject property that has sold recently. Some of you may ask well what’s recently, to me personally recently is in the last three months max six months. This information will allow you to better defend your suggested listing price to the seller, because you’ll actually be able to show the seller what’s selling if anything, and or what’s just sitting on the market and share some reasons why. This also will give you an idea on how long it can take to sell this home.
2. Acreage – I was taught to combine acreage with privacy, simply because the bigger the land area the more private the home is thought to be. This isn’t always true but more on that later. The acreage is important and adds a ton a value to a listing price, that you can’t overlook it. One day you may have a client who only wants an acre of land to keep lawn maintained low, but on other days you may have a client who wants a ton of privacy on 25 acres of land. Know what land is selling for in your market! But also don’t assume that because one property has 1 acre of land and the property you are pitching has two acres of land that your property is worth twice as much. That’s not how it works.
3. Location – Location, location, location! Need I say more?
4. Age/Condition – Most professional appraisers use a concept referred to as the effective age of a home. For example an 100-year home that has been rebuilt from the inside out with all new everything can have an effective age of 5 years where one of your comparable may be a 5-year old home but an effective age of 20 years due to poor maintenance and abuse from the owners. If it comes to actual age or effective age, effective age wins every time when selling to high-end clients who want a bigger bang for their million bucks.
5. Amenities – Is there a deep-water dock? Is there beach or a massive pool? How many feet of water frontage available? What’s all this worth in your market? What amenities does your future listing offer, that the comparable you found doesn’t have. This is important as it increases value, but can also negatively affect listing price because some buyers may not want those kinds of amenities. So take all that has sold, and the all the inventory that is selling into consideration in order to establish value for each.
6. Square Footage – Make adjustments to square footage, as it is very important. You do not want to use a home that is 10,000 square feet with a home that is 15,000 square feet. If you have to, which you will mostly likely have to do anyways make adjustments on the square footage based on what a square foot is selling for in your market and adjust accordingly. To know what a square foot is selling for, I would suggest talking to luxury homebuilders in your market to get a general idea on what a square foot costs. Do not use any builder for this information, do research on luxury home builders and build a relationship to have access to them and their knowledge at all times.